Stephen Satterfield · June 2009
77 GEO. WASH. L. REV. 1114 (2009)
In 2001, the Department of Health and Human Services’ Office of the Inspector General (“OIG”) began a series of audits of states’ claims for federal assistance under the Medicaid program. These claims for “federal financial participation” (“FFP”) were essentially states’ requests for federal matching contributions toward the cost of providing healthcare to low-income children under twenty-one who reside in so-called “institutions for mental diseases” (“IMDs”). Although the federal government had previously provided the states with such matching funds to help meet the medical needs of these children to the same extent it provided such funds for all other Medicaid-eligible children, the Centers for Medicare and Medicaid Services (“CMS”), had adopted the new position that the Medicaid statute only required FFP for a narrow subset of services provided to children living in IMDs, namely “inpatient psychiatric services.” Thus, while the federal government would continue to provide FFP for treatment in the form of psychotropic drug regimens and psychotherapy, the OIG announced that under CMS’s interpretation of the Medicaid statute, states were required to foot the bill for all other medical care and services that IMD residents required (e.g., acute care hospital services).
This new position resulted in the OIG’s requirement that states that had previously applied FFP to now-excluded services for children in IMDs reimburse the federal government for these costs. Facing millions of dollars in “disallowances,” several states challenged CMS’s new policy before the HHS Departmental Appeals Board (“the Board”). The Board’s response to the first of these challenges, in New York State Department of Health, agreed with CMS’s new, narrow interpretation of the Medicaid statute and upheld the disallowance of FFP against the State of New York. As this Essay will show, the Board’s decision, while perhaps consistent with the plain language of the statute, is radically at odds with the purpose of the Medicaid statute as a whole and with that of the particular provision in dispute.
Fortunately, CMS and the Board do not have the final say as to what the Medicaid statute means: Congress and the federal courts can also correct this misguided interpretation and right the ship that President Bush appeared to launch in his 2002 speech about the nation’s goals with respect to the treatment of the mentally ill. Accordingly, the Essay concludes that CMS’s interpretation should be reexamined and revised in light of the purpose of the Medicaid statute.
Part I of this Essay briefly describes the workings of the immensely complex Medicaid program and the statute and regulations that govern it. This Part includes a discussion of the so-called “IMD exclusion” in the Medicaid statute that prohibits federal funding for the care and treatment of certain persons living in IMDs. Part II describes the two exceptions to the IMD exclusion—namely those for children under 21 and adults over 65—and pays particularly close attention to the latter exception. Part III explains the Bush Administration’s new, narrow interpretation of the “under-21 exception” that has resulted in the almost-complete repeal of this important provision of the Medicaid statute. This Part examines the Board’s interpretation of the statute in New York, and concludes with some recommendations for Congress as well as for the courts that will be asked to confront the statute in the near future.
